Do you read the fine print on social networking sites before you hit the “I agree” button?
You do not. Join the club.
The law review article is titled — Wolves of the World Wide Web: Reforming Social Networks Contracting Practices. (Wake Forest Law Review, Volume 49, Issue 5 – Spring 2015).
“We are the first to report on what rights people waive by browsing these websites, even if they do not click an ‘I agree’ button,” Rustad told Corporate Crime Reporter in an interview last week. Rustad is a professor of law at Suffolk University Law School.
“Most people have no idea that they may be agreeing to unbalanced terms such as to pay the website their attorneys fees if they lose or to appear before an arbitrator in Beijing or Helsinki.”
“Only one or two in a thousand read the TOU, but even if they do, the average American is unlikely to fully understand this ‘contract,’” he said.
“Social media providers draft TOU at a reading level of grade 11 or 12, significantly above the eighth to ninth grade reading level of the typical U.S. high school graduate. Social media providers draft common rights-foreclosure clauses such as disclaimer of warranties, reduced statutes of limitation, elimination of punitive damages and extreme liability limitations at or above an average college graduate’s reading level.”
“This statistical finding casts doubt on a fundamental premise of the law of online contract formation — that an opportunity to review is sufficient to engineer contractual consent.”
“Greater than one in four SNS requires consumers to accede to arbitration, often in distant forums, where the cost of filing and travel usually far exceeds the cap on damages and limited remedies afforded to the consumer.”
“Our data confirms that social networks such as Instagram, Match.com, and Christian Mingle devise alternative dispute resolution clauses that systematically foreclose user rights, while aggressively expanding their own legal options, which violates several of the fundamental fairness principles prescribed by the two largest arbitration providers, American Arbitration Association and Judicial Arbitration and Mediation Services.”
“The final part of our article demonstrates that social media TOU frequently violate nine standard provisions of the European Union’s Unfair Contract Terms Directive (UCTD) by including terms that are blacklisted in the EU as fundamentally unfair.”
“European consumer protection bodies have fined U.S. online companies, including YouTube, Google, Microsoft, America Online, Facebook and CompuServe, and required them to modify their TOU or exit the European consumer market.”
“Our hybrid reform proposal couples U.S.-style disclosure and readability reforms with EU-style substantive justice modifications, which will enable consumers around the world to retain their basic rights.”
“To address the problem of incomprehensible TOU, providers will be required to draft rights-foreclosure clauses with a minimum readability level coupled with standardized disclosures.”
“We also propose that Congress enact black lists of prohibited clauses and grey lists of suspect provisions modeled on European law and forbid drive-by contracts, predispute arbitration, and the complete disclaimer of warranties and meaningful remedies.”
“Social network providers are targeting the global consumer marketplace and therefore must accommodate their contracting practices to comply with mandatory consumer rules in each country.”
“Harmonizing or localizing social network consumer protections will ultimately lead to greater certainty for providers as well as protect the basic rights of consumers around the world.”
Rustad had for years focused his work on tort law and punitive damages. But a few years ago, he shifted to contract law. Why?
“My early work was on federal and state tort reform, which is the public face of tort reform,” Rustad said. “I am now more interested in private tort reform through contract law.
“Punitive damages is a remedy with a rich legal history in constraining abuses of power, which explains its relevancy. The tort reform wars were won by corporate political muscle. Punitive damages have been crippled because of the success of the tort reform movement in convincing the U.S. Supreme Court and ordinary Americans that this remedy was in need of radical downsizing.”
“Despite the unanimity of social science research findings that there is and never was a nationwide punitive damages crisis, the majority of the Court agrees that concerted judicial action is required to contain excessive punitive damages awards.”
“Studying punitive damages after the Court’s takeover of the remedy and widespread state tort reform was becoming more like a study of legal history of a remedy that has been constrained, and cabined.”
“We need to rehabilitate this important remedy.”
“Grant Gilmore’s book, Death of Contract, predicted that tort would soon cannibalize contract law.”
“In fact, it is contract law that is supplanting tort law along a broad front.”
Let’s say a company makes it clear that they are out to stick it to an American consumer. They say clearly — if you arbitrate with us, we will set up the arbitration in Mumbai.
What good is that?
“To a U.S. consumer, this requirement is, in effect, an anti-remedy.”
“On the other hand, Indian consumers who are members of Facebook must litigate in San Jose, under California law.”
“Choice of forum clauses that impose the dominant party’s forum divest the consumer of a realistic, cost justified remedy. Modern technology easily permits non-appearance arbitration through the Internet or by telephone. But we found that few providers offer this or other alternatives that would level the playing field.”
You say there is a drought of arbitration filings. How so? And why the drought?
“Hundreds of millions of social media users are subject to arbitration filings before the American Arbitration Association and the Judicial Arbitration and Mediation Services.”
“We searched the files of the past four years of these services and found only a handful of filings.”
“The cost of filing an AAA consumer arbitration is $200; JAMS charges $250. Since most arbitration clauses contain anti-class action waivers, it is not possible to join small dollar amount claims.”
“When the cost of submitting to arbitration far exceeds potential recovery, no lawyer or economically rational consumer will initiate a case. The costs of travel, lodging, legal advice and other expenses associated with consumer arbitration makes it even more unlikely that consumers will arbitrate, much less litigate, their grievance.”
“Even if the provider pays for the cost of the arbitrator, the cost of filing alone makes these actions cost-prohibitive. Anti-class action waivers slam the door shut to any practical remedy.”
[For the complete q/a format Interview with Michael Rustad, see 27 Corporate Crime Reporter 16(12), April 21, 2014, print edition only.]